Investing in Illiberalism

Why European Businesses Should End Their Embrace of Hungary and Poland

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THORSTEN BENNER is Director of the Global Public Policy Institute in Berlin. Follow him on Twitter @thorstenbenner.
WOLFGANG REINICKE is President of the Global Public Policy Institute in Berlin and a Professor at the School of Public Policy at Central European University, where he was Founding Dean from 2011 to 2016.

“Europe,” Emmanuel Macron said last month, “isn’t a supermarket.” The French president was referring to the recent illiberal actions of some central and eastern European states, which he argued had come to rely on the bloc to “dispens[e] credit” in the form of budgetary assistance “without respecting [the EU’s] values.” Though Macron didn’t mention them by name, it was clear that he was referring to Hungary and Poland.

It is easy to understand why Macron made that statement. Hungary and Poland have profited from the EU’s common market and generous investment funds, but they have defied its core democratic norms. In Hungary, Prime Minister Viktor Orban has built what he has called an “illiberal state” by rewriting the constitution, hollowing out democratic institutions, harassing civil-society groups and universities, and pursuing hateful campaigns against migrants, Muslims, and liberal philanthropists such as George Soros. Poland’s ruling Law and Justice (PiS) party has taken similar steps: most recently, it sought to put an axe to the independence of Poland’s judiciary with four new bills (two of which have been signed by Poland’s president). Both governments have vowed to use their veto power in the European Council to protect each other from EU disciplinary measures.

As Polish and Hungarian officials have sought to defend their records on the international stage, they have used their governments’ successes in attracting foreign investment as fig leaves for their illiberalism. In May, Orban argued that chastising Hungary’s policies was “foolish”: the country, he noted, enjoys some of the highest economic growth rates in the EU. Mateusz Morawiecki, Poland’s deputy prime minister, put it more bluntly in April, as his government faced censure from Brussels over its crackdown on Poland’s judiciary. “Investors have voted with their money,” he told the German newspaper Handelsblatt.

The West’s industrial giants have done little to prevent themselves from being used in this way. To the contrary: many of them have been happy